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Court rejects settlement of suit over Kellogg cereal health claims

July 13, 2012 | 11:36
am

SAN FRANCISCO -- A federal appeals court Friday rejected a class-action settlement against Kellogg Co. for making false health claims about its cereal because the pact gave $2 million to the lawyers who sued and at most $15 for each consumer.

The three-judge panel of the 9th Circuit U.S. Court of Appeals said the hourly $2,100 fees paid to attorneys who brought the lawsuit were excessive, and the pact failed to identify which charities were slated to receive money under the settlement.

The suit charged that Kellogg had falsely advertised its Frosted Mini-Wheats cereal was scientifically proven to improve children’s cognitive functions. Under the settlement, Kellogg agreed to establish a $2.75-million fund for consumers. Those who submitted claims could receive $5 for each box of cereal they bought for a maximum $15. Any money remaining would go to charities.

Kellogg also agreed to distribute $5.5 million worth of Kellogg food products to charities that help the poor. The settlement failed to identify the charities or specify whether the value would be computed at cost, by wholesale or some other means.

Kellogg agreed to stop claiming Mini-Wheats was clinically shown to improve attentiveness by nearly 20%, but could continue to cite studies that showed kids who ate the cereal were more attentive in school than children who skipped breakfast.

Attorneys in the case valued the entire settlement at $10.6 million. But the court said the terms were too vague to validate that number, and even if true, the attorneys’ fees were excessive in comparison to the “paltry” amount awarded consumers.

Citing the $2,100 hourly rate for the plaintiff lawyers, the court said: “Not even the most highly sought after attorneys charge such rates to their clients.”